When it comes to day-to-day life, we usually like to think of age and birthdays as “just a number.” But when it comes to our tax returns, those numbers can actually make a big difference! It’s important to understand how your deductions will change from year to year based on your age—and your children’s ages.
Tax Obligations in Relation to Your Age
Your local accounting firm should be keeping an eye on these numbers for you. But just for a refresher, here are some of the key details to keep in mind whenever you reach one of these key milestones.
New Births – Age 17
If you welcomed a new baby or child into your family last year, that creates a new dependent on your tax return. There could also be deductions for your new childcare costs. However, that specific dependent care credit drops off at age 13. And once a child reaches age 17, your $2,000 credit goes away too. Fortunately, we now have a special $500 family credit to help offset tax obligations. But it’s still good to have a head’s up about when those other credits will disappear.
College Years
If your “qualified taxpayer” still qualifies as a “student,” the age limit for your own dependent credit could get an extension up until they turn 24.
Entering Your 50s
When you’re a quinquagenarian—try saying that five times fast!—things really start to get interesting. The retirement “catch up” provision opens up when you reach 50 years old. You’ll be able to contribute more to certain retirement accounts, including IRAs, any 401(k)s, 403(b)s, your Sep IRAs, SIMPLE, as well as others. Talking with both your financial advisor and accountant will help you plan accordingly and maximize these accounts and how they’ll grow.
Social Security Years
Depending on the year you were born, your Social Security benefits might have kicked in as early as age 62. If you delayed taking them, those retirements will reach their maximum at age 70. After that, you’ll need to start taking the minimum distributions from specific accounts once you turn 72. However, it was decided that those distributions would be suspended temporarily in 2020. Again, being able to touch base with your financial and tax professionals will help keep you on track and monitor your budget and savings appropriately.
Need Help Organizing Your Returns?
Whether you’re just beginning the process of starting last year’s tax return or you’re looking to get a jump start on your tax planning for the current calendar year—our team is here to help! We’re proud to serve the Fishers and the greater Indianapolis area. Plus, NSO and Company even works with clients who live outside of Indiana.
Please don’t hesitate to reach out so we can schedule your initial consultation. It’s never too early to start planning. From age 18 or 19, all the way to your senior and retirement years, let our experience guide you down the right path. Call us at (317) 588-3131 to learn more.